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Permalink Reply by stephanemot on July 1, 2010 at 9:53am

The Chaiwan deal between China and Taiwan will have a major impact. And wage hikes in China are followed by similar pressures in lower cost countries.

In this context, Toyota announced 30% price decreases within a few years, clearly meant at undermining Hyundai-Kia's momentum.

Korea may face a tough moment, and feel a bit lonely if Southeastern Asian nations form a defensive block against China.

Permalink Reply by Steven S. Bammel on July 5, 2010 at 9:22am

What do you mean by "if Southeastern Asian nations form a defensive block against China"? Do you mean they might find ways to become more competitive against Chinese goods? If so, why would this matter to Korea in the short run? As I understand it, Korean exports to China are primarily industrial goods, so if Southeast Asia decides to ramp up, won't they need to make new capital investment, which will result in purchases of more industrial goods from Korea too?

Permalink Reply by Steven S. Bammel on July 5, 2010 at 9:20am

I find it very interesting that Korean trade with Europe and the US combined is about the same as with Southeast Asia, and less than with China. I would have figured Korean exports to Europe/US would have been a much bigger part of the pie.

I had heard that the strong Korean economic performance during 2009 was due, in large part, to growing sales to China, but this really clarifies why.

Thanks for the insights. Keep up the good work, Robert!

Permalink Reply by Robert Eberenz on July 7, 2010 at 9:59am

The balanced of trade relationships that Korea has grown and fostered over the years is indeed interesting. China is clearly a huge player for Korea to consider, making Chinese Yuan fluctuations a real issue.

I also have to disagree with the point about SE Asia forming a defensive block against China. SE Asia is more heavily dependent on China than Korea and would have no interest in somehow blocking trade with their largest buyer. It's similar to the Wal Mart dilemma, where their largest buyer is a blessing and a curse.

The general theme in Asia, which is synonymous with regions of such rapid growth, is one where a rising tide lifts all ships. Asian countries trade more or less within themselves until they produce finished goods products then sell those products among themselves, while still depending on the Western market to purchase the high margin goods.